Comment: A cap may be seen as a payoff for improving Isas in other ways
while limiting the cost

Victims of George Osborne’s policy on savings know not to hold their breath when the Chancellor stands up to deliver his Autumn Statement at 12.30pm on Thursday, December 5.

Years of so-called “financial repression”, where a government designs policy to help cure its debt problems, by keeping rates low and monetary policy loose to create inflation, has become a way of life that millions of Britons have been forced to get used to.

These policies mean all savings accounts pay less than inflation, losing real value. But it also sends everyone chasing income elsewhere, in property and shares, creating dangers for savers, who buy overpriced and riskier assets than they would otherwise. Lastly, of course, it pushes down the income available on annuities. It’s an attack on every front.

Five years after the assault began, can we finally expect some compensation for savers, maybe through the Isa system?

We’ll turn to that in a moment. First, let’s look for a bright spot on income tax.

Many are predicting a further increase in the personal allowance, the money most of us can earn each year before we start paying basic-rate tax. Where the tax stranglehold has broadly tightened its grip, this has been one for relief. You could earn £8,105 free of income tax last year, rising to £9,440 this year and it will be £10,000 for the next tax year, starting in April.

The Liberal Democrats are pushing for Mr Osborne to put it up to £10,500 in 2015, and have made an election pledge, for what that’s worth, of a rise to £12,500 thereafter.

But while one hand gives, another takes away. Those paying higher-rate tax have benefited very little from these increases. As fast as one threshold rises, another – the level at which 40pc tax kicks in – falls.

This was £42,475 last year, falling to £41,450 this year.

Year

40% taxpayers

09/10

3.19m

10/11

3.26m

11/12

3.86m

12/13

4.1m

13/14

4.61m

14/15

5m

Source: Grant Thornton

The eventual destination of this trajectory, of course, would be to erase the 20pc band – and leave 40pc as the new basic rate.

Mr Osborne’s action was more conciliatory in this year’s Budget, with a small rise in the starting point for higher-rate tax from April, of £41,865.

With a general election looming in 2015, tax expert Mike Warburton of Grant Thornton expects more of the same. If the threshold rises by £500 to £10,500 in 2015, he expects at least some of the benefit, possibly half, to be felt by higher-rate taxpayers.

That’s of little comfort by this point. The “fiscal drag”, caused by wages rising but thresholds holding, or falling, has turned 1.5 million Britons into higher-rate taxpayers in the past four years, up from 3.2 million to 4.6 million. Increasingly, those in retirement are feeling its ill-effects, particularly those of pensionable age who continue to work part-time. Of course, pensioners have all but lost their perk of an additional tax-free allowance after Mr Osborne froze the threshold, infamously labelled the “granny tax”.

Fighting that measure appears to be a lost cause. It’s time to fight on another front: Isas. The Government, given its other sins, should help those who have done the right thing – or want to – by amassing a savings pot to fund retirement.

Millions have used Isas to build a stock market portfolio. But shares hold risks for those in need of secure income and the Isa rules mean only half the £11,520 allowance can be cash savings. Changing that rule, to allow a transfer of greater amounts to the safety of a savings account, would be one step towards helping savers.

Even better would be to do away with the distinction between cash savings and stock market savings so that full amount – which should be confirmed as £11,880 by Mr Osborne for next year – can be a cash Isa. The rates may be poor, but at least savers should have the choice and those saving today for the long-term can plan safe in the knowledge of having more flexibility in the future.